Two? Five? Ten? How many credit cards should I have?
Have you ever wondered how many credit cards are considered to be too many? The answer to this question is that there is no specific number of credit cards that you must own. However, if you are still confused about the number of credit cards that one should own, then you’d be happy to know that there are a few tips and tricks that can help you find your way to stand on solid financial ground.
Should you have more than one credit card? The answer to this question might just be a big “no!”, especially in the event that you somehow end up being surrounded by a huge pile of credit card debt. However, if your credit score is actually good, then the answer to this might be quite different for you.This is because if you have a good credit score, you can enjoy a lot of advantages of having multiple credit cards. Your credit score can be impacted by the number of credit cards that you own — or at least their joined credit limits. Thus, impacting your ability to secure significant deals like car loans and apartment rentals.
As per the American Bankers Association, there were 377 million open credit card accounts in the U.S. in 2020. Furthermore, different reports discovered that in any event almost two of every three Americans at least owned one credit card. In addition to this, there are upsides and downsides to possessing different credit cards, however the vast majority can concur that having numerous credit cards can either help or obstruct your FICO rating, contingent upon how well you oversee them.
How many credit cards should I have? If this question has been on your mind, then you have come to the right place. We have gathered all relevant information to help you understand everything that you need to know about how many credit cards you should have. So, what are you waiting for? Without much further ado, let us dive right in!
Table of Contents
- 1 How many credit cards should I have?
- 2 How many credit cards is too many?
- 3 Benefits of having multiple credit cards
- 4 Things to watch out for if you have multiple credit cards
- 5 Choose the right mix of credit cards
- 6 How multiple credit cards affect your credit score?
- 7 How many credit cards do people with an excellent credit score have?
- 8 Get rid of credit cards you don’t use
- 9 What cards should you keep?
- 10 Conclusion
How many credit cards should I have?
There is no predetermined or perfect number of credit cards that you should have. The way you spend your money and your capacity to cover all bills on time decides your sweet spot. In addition to this, on the off chance that you like piling up points from rewards, you should look out for credit cards that augment and maximize grocery items, travel or gas spending. In the event that you need to keep things straightforward and only have a few cards that deal with your necessities, that is fine as well. What makes more of a difference for your credit score are the credit propensities you follow, paying little mind to the number of cards you have.
Furthermore, there is no doubt about the fact that everyone has different circumstances that they go through. Therefore, there is no set number of credit cards that an individual should have. A solid contention can be made for having at least one credit card to take advantage of the characteristic convenience, security and its different advantages. Defending having more than one credit card can rely upon whether you need the additional credit lines to accommodate your month to month optional financial plan or in the event that you try to use your ordinary spending to make different kinds of rewards like cash back, points or airline miles.
In any case, the question still remains: How many credit cards should you have? Although there is no specific number of credit cards that an individual ought to have, it is still sometimes preferred that you atleast have two credit cards. In a perfect world, each card would be from a different network (Visa, Mastercard, American Express, Discover, and so forth) and each offering you various types of rewards (cash back, miles, reward points, and so on). Furthermore, another question that also arises is that what number of credit cards would be considered as too much? This relies upon the individual – you should never have more than what you can deal with. In addition to this, experts say that the quantity of cards one ought to have changes according to the individual in question and his/her situation. “Generally speaking, there is no one perfect number,” said Ethan Dornhelm, a VP at FICO.
While the number differs by age, credit score and other different factors, the average American has three credit cards and 2.4 retail store cards, as per a 2020 study by the credit detailing organization Experian. To guarantee a blend of credit cards and ensure that your credit score continues to increase, you must ask yourself two questions about the cards in your wallet:
- Do you have cards across more than one network? In the event that you have three cards, however all of them are Mastercards, this could be an issue on the off chance that you run into a shipper who just takes Visa. For example, Costco only acknowledges Visa now, however you can utilize your Mastercard on the distributor’s site.
- Do you have a low credit card usage proportion? Your normal adjusts across the entirety of your cards for as long as two years ought to address close to 10% of your general credit limit.
Here are two things that can assist you with deciding the number of cards that is appropriate for you:
- Continuously keep your general credit card usage low, and
- Secure admittance to more than one credit card organization.
How many credit cards is too many?
As a credit card optimizer (if you are one), you may contemplate whether having a certain number of credit cards is considered to be too much. On the off chance that you can’t afford to pay your bills, don’t need a credit card, and/or don’t plan to use it for some reason, then having even two credit cards can be considered to be too much. While getting another credit card can now and then improve your credit score by possibly bringing down your total credit line usage, getting multiple credit cards in a brief timeframe isn’t prompted. Furthermore, many card issuers even have rules set up to battle this trend that has emerged with clients who attempt to trick the system by pursuing multiple credit cards to procure the rewards and then later cancel in the wake of meeting the spending prerequisites.
“For an individual who is mindful about utilizing their cards and never carries a balance then no, there could be no number of cards that is too much,” says credit expert John Ulzheimer. Then again, “in case you’re utilizing your cards as a supplement to your salary and you’re carrying balances every month, at that point one card might be too much.” As long as you’re keen about utilizing your credit card and practicing responsible credit practices, like making installments on time and in full, you can open as many credit cards as you need.
Let us look at an example. For instance, Chase has a policy named 5/24, which doesn’t permit you to be endorsed on the off chance that you have applied for in excess of 5 credit cards (paying little heed to backer) in the previous 24 months. Another likely drawback of having multiple cards is that it can make you look risky to banks and lower your credit score. Regardless of whether you have them all taken care of, the simple fact that you have a ton of open and accessible credit lines can make you resemble a likely risk to the following bank. Along these lines, while there is no outright number that is viewed as too much, it’s ideal to apply for and carry only those cards that you require and can justify utilizing depending on your credit scores, ability to pay balances and rewards goals.
Benefits of having multiple credit cards
- You can have a different credit card only for online shopping. This can help you monitor your spending and let you watch out for fraud or misrepresentation.
- You have a back up in the event that one of your credit cards is lost or taken. It assists with having a second card accessible in the event that it takes over a day to get a substitution card.
- You may get a good deal on interest charges by transferring credit card balances to another card that has a lower APR or a special rate.
- You can have an additional card as a back up when traveling abroad. This is useful in the event that your essential card isn’t acknowledged where you travel.
- You can be strategic with the rewards and points you gain. Contingent upon the various rewards each offers, you may choose you need numerous credit cards to procure the most extravagant potential awards in various classifications. For instance, a private-label card may give you the best advantages at your number one store, however, to buy things anywhere else, you may like to utilize your travel rewards card to work towards your next excursion.
Things to watch out for if you have multiple credit cards
- Consider leaving older cards open, regardless of whether you apply for another card. This will give you a more drawn out credit history, which is useful for your credit score.
- Utilize all cards once in a while to ensure that they do not deactivate. In the event that you have different credit cards, you may wind up with cards you don’t utilize. On the off chance that your cards become dormant, it could influence your credit. Check with your card guarantor to understand what leads to the deactivation of a credit card. A few cards likewise have yearly expenses. Make certain to comprehend the states of every one of your records so you can design appropriately.
- Try not to open new records with the sole expectation of building your credit score. As per Experian, this is anything but a smart practice. Remember: it’s not the quantity of cards you have, it’s the means by which you use them, and you can have as great a score with 2 cards similarly as with 5 or 10.
- Watch out for the total you’ve borrowed. It’s simpler to add to debt when you utilize various cards. Ensure you utilize your cards admirably; opening another card isn’t an answer for other monetary issues and can prompt unmanageable obligation as it were. On the off chance that you have another, low-APR card as an approach to combine obligations at a lower loan cost, utilize the card as you arranged. Try not to utilize the additional credit to stray into the red.
- Consider timing before you apply for another card. In the event that you apply for a few cards inside a brief timeframe, it can adversely influence your credit score—and in case you’re purchasing a vehicle or a house soon, that could mean you end up with loan terms that are not too good.
Choose the right mix of credit cards
On the off chance that you choose to open multiple credit cards, it’s a smart thought to consider how each card can help you get a good deal on your spending. You can boost benefits by choosing a blend of cards offering a scope of benefits, for example, bonus cash back on select buys, initial 0% APR cards, travel prizes and then more. It’s unquestionably ideal to have numerous cards on the off chance that they permit you to enhance rewards focuses.
For instance, in case you’re somebody who drives regularly and does supper prep, you might need to consider cards that offer expanded awards on gas and food supplies. Our top picks are the PenFed Platinum Rewards Visa Signature Card, with 5X focuses on gas, and the Blue Cash Preferred Card from American Express, which offers 6% money back at U.S. grocery stores on up to $6,000 each year in buys (at that point 1%). These cards can assist you with expanding rewards so you can set aside cash over the long haul.
How multiple credit cards affect your credit score?
The number of cards you own doesn’t directly impact your credit score. On the off chance that having more cards implies you utilize less of your available credit, then this can help your credit score. However, in the event that having multiple cards complicates your life and you incidentally end up paying late, it will hurt your credit score. What’s more significant than the actual number of cards is whether you pay on time and generally utilize a little segment of your available credit.
Most individuals with FICO scores of 795 or higher (which is perceived as a great credit score) don’t have late installments on their credit reports and all things considered, they utilize just 7% of their credit limits, as per a 2019 report by credit scoring organization FICO. Having more than one credit card can possibly both lift and lower your credit score, yet everything relies upon how you deal with your credit cards. Below, we portray how the primary components of your credit score might be influenced by opening another credit card.
The main element of your credit score is payment history, making it key to consistently pay on schedule so you keep away from late installment charges and penalties. Having more than one card may make it harder to oversee different payment due dates. You should call your credit card organization and have them reset the charging cycles so they are indistinguishable for every one of your cards. This is on the grounds that it is simpler to recall one day than a few, which means you’re less inclined to miss an installment. Many card backers additionally permit you to change your installment due date in-application or on the web. Another security measure is to set up autopay, which removes a portion of the pressure of shuffling various due dates.
Amounts owed (aka credit utilization rate)
The amount of cash you owe across the entirety of your credit cards — otherwise called your credit utilization rate — is another huge element of your credit score. Specialists suggest keeping a utilization rate beneath 30% per card. To discover your credit utilization rate, just include your balances across all cards and divide by your absolute available credit limit.
Credit expert, Ulzheimer, clarifies that having different credit cards can provide you with a lower balance-to-limit ratio together with assisting you grow your purchasing power, which helps in building your credit score. In any case, the essential con is you can find yourself mixed up with a huge load of truly costly debt in case you’re not responsible. What’s more, you should understand that even though you have heaps of credit available to you, it doesn’t mean you should utilize it.
In the event that you open an extra credit card, you’ll approach more credit, which thus may permit you to all the more effectively keep a low usage rate as compared to having just one card. However, for certain individuals admittance to more credit can be an enticing reason to overspend, which could bring about a lower credit score.
Given below is a small example of the potential beneficial outcome that having more than one credit card can have on your utilization rate: Ester has four credit cards and Karen has one card.
- Ester’s complete credit limit is $10,000: $4,000, $3,000, $2,000 and $1,000 over her 4 cards
- Karen’s complete credit limit is $2,000: on one card
In the event that Ester and Karen both go through $1,000 each a month, their usage rates would be:
- Ester: 10% ($1,000/$10,000 = 0.1 X 100)
- Karen: half ($1,000/$2,000 = 0.5 X 100)
This model shows that it’s simpler for Ester to keep a lower usage rate than Karen when going through a similar measure of cash across four credit cards. Yet, Ester ought to be mindful so as not to overspend with her higher credit limit.
Average length of credit history
At the point when you open another credit card, the normal length of your credit history diminishes. This commonly just dings your score a couple of points and it comes back up in a couple of months, however in the event that you open different cards within a brief timeframe, the points can add up. For instance, on the off chance that you opened your first card in 2004 (17 years prior) and choose to open another card today, the normal length of your credit history would diminish from 17 years to 8.5 years. That is a huge contrast and may cause your credit score to diminish.
Number of credit inquiries
Each time you apply for a credit card — regardless of whether you’re affirmed or denied — the credit card backer pulls your credit report. These requests adversely influence your FICO rating, however your score will ricochet back over the long run. The more credit cards you apply for, the more requests show up on your credit report. Many card backers give pre-capability frames that permit you to check your capability chances without harming your credit. In any case, know that in the event that you choose to present a conventional application, your credit will be pulled.
How many credit cards do people with an excellent credit score have?
What number of credit cards would it be advisable for you to have on the off chance that you need an incredible FICO rating? As indicated by Ethan Dornhelm, VP of FICO Scores and prescient examination, there’s no ideal number. A financial assessment is an individual rating that decides the interest you pay for a credit, or whether you meet all requirements for an advance by any means. It’s determined on the basis of your payment history, the amount you owe, your length of record as a consumer, the types of credit you have and how frequently you apply for new credit.
“The sheer number of credit card accounts that a customer has is significantly less imperative to the FICO Score than how the buyer is dealing with those records,” says Dornhelm. “Is it accurate to say that they are covering their bills as concurred? Is it accurate to say that they are keeping their balances low as compared to available credit limits? These activities are the main drivers of their FICO Score.”
In any case, it’s helpful to think about the wallets of individuals with extraordinary credit. In a new investigation, FICO found that cardholders with scores over 800 — an exceptional credit score ranges from 750 to 850 — had an average of three open cards, as indicated by Dornhelm. On the off chance that you incorporate both open and closed records, they’d have six cards altogether.
Adding another card is one approach to expand the credit accessible to you, which permits you to spend more while keeping a protected use proportion, or the sum you’ve spent contrasted with your credit limit. “The lower your proportion of balances to your total credit limits, the better,” says Dornhelm.
Generally speaking, you should attempt to keep your utilization rate under 30%. You can sort out the thing it is by including your month to month spending — the balances on the entirety of your cards — and partitioning that number by the amount of your cutoff points. For instance, carrying a surplus of $200 and having a credit breaking point of $1,000 would give you a utilization rate of 20%. On the off chance that the rate is excessively high, getting another card could bring it down since it raises your absolute acknowledge limit — as long as your spending stays something similar.
Get rid of credit cards you don’t use
Check your statements to find out whether you’re actually utilizing a credit card in the manner in which you imagined. Do you truly swipe your gas card at the service station, or do you simply whip out the first card you can find? A card that you are not using ought to be disposed of, regardless of whether it’s been in your wallet for eternity. You don’t need a hanging card — particularly one that charges a yearly expense — standing by to raise a ruckus. It’s generally best for your monetary wellbeing to keep your life as straightforward as could be expected.
One admonition is that your financial assessment may vacillate after you close a credit card, however it ought to return to where you were, given that you keep up a good credit conduct (like covering your bills on schedule and trying not to utilize a lot of your available credit). However, in the event that your card is still in rotation, or on the off chance that you have some reason to accept that you’ll utilize it later on, cling on to it. No one can tell when a valuable instrument may prove to be useful.
What cards should you keep?
There are cards you’ll want to have for a longer period of time and some that are valuable for a short time (typically around a year or two).
Cards you should keep:
You need to keep at least one credit card for a couple of years, as long term monetary connections ought to consider your FICO rating in a favorable light and a few moneylenders are bound to offer you credit. Other than this card, you could keep the cards that give you rewards you really need and use as a trade off for spending on them.
Cards for the short term:
There’s nothing amiss with having a 0% purchase card in your wallet, yet you ought to genuinely consider when you will most need a temporary interest free credit infusion. While you can’t get ready for everything and it could take up to a month to get a 0% card, it’s as yet a smart thought to keep your FICO rating clean and save applying for one when you truly need it. The equivalent applies to 0% balance transfer cards. Obviously, you could likewise be a ‘rate tart’ and dance between 0% offers always failing to pay a penny in revenue, however this expects you to be focused and on top of dealing with your accounts. In case you’re acceptable at shuffling, card adjusts between 0% gives you could even bring in cash by ‘stoozing’, yet this can be an unsafe and complex arrangement.
There are numerous advantages to having multiple credit cards, however just on the off chance that you oversee them responsibly. What’s significant is that your cards give you admittance to more than one organization and offer you the prizes that best address your issues. To guarantee that having a few credit card records will work for you, not against you, know about the advantages each card offers, your credit limit on each record, and particularly your installment due dates. Utilize each card for your best potential benefit, make a point to keep your balances low, and, if conceivable, consistently cover your balances prior to the due dates.